Macau business daily, Dec 10th by Business Daily

MOP 6.00 Vitor Quintã Deputy editor-in-chief Editor-in-chief Tiago Azevedo

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acau travel agencies have been cutting tours to Bangkok since the beginning of December due to the political protests in the Thai capital. Macau has direct air links to Bangkok and the northern city Chiang Mai and – with a journey time to either destination of under three hours – they are popular destinations locally for weekends or short breaks. “All of our tour groups’ trips to Thailand from December 2 to December 18 have been cancelled,” said Sabrina Iong Ut Iong, general manager of EGL Tours (Macau) Co Ltd. “Altogether we had six to seven tour groups cancelled, of which each group had around 20 members,” she told Business Daily. Hong Kong issued a ‘red’ travel alert on December 2 warning its residents to “avoid non-essential travels” to Bangkok.

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Thailand tour trade hit by crisis

More on page 3

Year II

Number 432 Tuesday December 10, 2013

1 Christmas meets ‘Mao-mas’: ‘SJM Cotai’ might have Chinese gamblers get festive different name

April 19, 2013 Transmac to work with govt to fix bus system

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French cosmetics retailer aims to expand in Macau

Airport-style smoking rooms for casinos?

French cosmetics retailer L’Occitane SA is planning more outlets in Macau, having recently opened its third store here, in the Senado Square prime shopping area. L’Occitane’s president in the Asia-Pacific region, André Hoffmann, says his company aims to open two more shops here, in 2014 and 2015, in new shopping centres. Mr Hoffmann told Business Daily one shop would be in the second phase of the Galaxy Macau casino-resort.

Macau gaming operators want to set up airport-style closed smoking rooms – with no gaming tables or machines – to replace the existing smoking areas, the government said. The city’s six gaming concessionaires and subconcessionaires have filed a joint petition for such spaces, the Health Bureau stated late on Sunday. The bureau said in a press statement it would discuss the suggestion with the Gaming Inspection and Coordination Bureau.

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Agencies ‘exploit’ mainland workers, pan-democrats say

23780

December 9

HSI - Movers Name

%Day

CHINA MERCHANT

5.49

PING AN INSURA-H

2.22

LENOVO GROUP LTD

1.94

HENGAN INTL

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SANDS CHINA LTD

1.62

PETROCHINA CO-H

-0.66

HANG LUNG PROPER

-0.79

HENDERSON LAND D

-0.79

COSCO PAC LTD

-0.89

CHINA RES LAND

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Source: Bloomberg

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Employment agencies “systemically exploit” mainland Chinese workers here by deducting some of their monthly wages, says the New Macau Association. The pandemocratic group yesterday released its third annual report on Macau’s human rights. It claims the situation continues to “deteriorate”. The report claimed nonresident employees from mainland China have “to pay a certain percentage of their wages to the employment agency on a monthly basis” as commission. Page 5

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December 10, 2013

Macau

French cosmetics retailer aims to expand in Macau High rents and insufficient labour do little to curb L’Occitane’s confidence Vítor Quintã

vitorquinta@macaubusinessdaily.com

rench cosmetics retailer L’Occitane SA is planning yet more outlets in Macau, having only just opened its third store here, in the Senado Square prime shopping area. L’Occitane’s president in the AsiaPacific region, André Hoffmann, says his company aims to open two more shops here, in 2014 and 2015, in new shopping centres. Mr Hoffmann told Business Daily in an interview that one shop would be in the second phase of the Galaxy Macau casino-resort and the other would be in another Cotai resort. “We are talking to all the developers,” he said. He said L’Occitane intended to introduce its smaller brands in Macau,

KEY POINTS Two Cotai outlets in the offing Smaller brands to make debuts Senado Square shop profitable Labour shortage a ‘key issue’

starting with its Melvita organic skincare products. “This would the next brand we would like to launch in Macau. We are already looking for an appropriate retail location,” he said. Mr Hoffmann said L’Occitane had launched Erborian, a French-Korean brand of skin therapy products, in the mainland last year and now intended to launch it in Macau. “I absolutely believe there is potential for us to open more stores,” he said. “In Macau we can easily have five or six stores.” He said the number of tourists coming to Macau probably made the market here similar to Hong Kong’s. “It’s one of the most unbelievably dynamic cities in the world in terms of hotels and shopping centre development,” he said. “The market will continue to expand.”

Pleasant surprise Mr Hoffmann was speaking in L’Occitane café, which will open this week on the upper floor of L’Occitane’s shop in Senado Square. He said the company had opened cafés in L’Occitane shops in Tokyo and Taipei, and that the combination had been successful. “Customers get to know L’Occitane often through the café. The café is drawing customers into the shop,” he said. Mr Hoffmann said that even though L’Occitane paid a “very, very high rent”, the Senado Square shop

was turning a profit and had helped the company increase its sales in Macau by 124 percent so far this year. In the past six months L’Occitane has gone from having one outlet in Macau, in the Venetian Macao, to having three. The second opened recently in the New Yaohan department store. Mr Hoffmann said the expansion “has been a pleasant surprise in terms of extra revenue it has created for the brand”. He predicts that Macau will account for more than 10 percent of the sales made by L’Occitane’s Hong Kong operation, which its Macau outlets are a part of. In the six months ended September 30 the Hong Kong operation had 46.6 million euros (509.6 million patacas) in revenue, 2.3 percent more than in the equivalent period last year.

Clouds gathering “There is a lot of blue sky ahead in terms of opening new stores,” Mr Hoffmann said. But he also acknowledges a few clouds on the horizon. “Human resources is a key, key issue,” he said. Mr Hoffmann said Macau’s “very tight labour market” had surprised him. “The casinos have sucked a lot of people out of the labour pool. So finding qualified retail and café staff is a challenge,” he said. He said getting imported labour was a headache. “Hopefully, the government can

L’Occitane café will open this week on the upper floor of the brand’s Senado Square shop (Photo: Manuel Cardoso)

review their policies and perhaps make the law a little bit more flexible, a little bit easier to bring labour here.” Mr Hoffmann pities the operators of the casino-resorts soon to rise in Cotai. “Frankly speaking, I don’t know where they are going to find the staff to work there,” he said. “I’m sure the government is aware of this and they are reviewing it. But at some point, if the economy wants to continue to grow, something’s got to give.”

Hopefully, the government can review their policies and perhaps make the law a little bit more flexible, a little bit easier to bring labour here André Hoffmann, L’Occitane Asia-Pacific president

December 10, 2013 April 19, 2013

Macau

Demos in Thailand hurt tour business Macau people change their holiday plans as political turmoil rocks Bangkok Stephanie Lai

sw.lai@macaubusinessdaily.com

acau travel agencies have been cancelling package tours to Bangkok since the beginning of this month because of the political unrest there. Demonstrations in the streets of Bangkok have also deterred independent travel to Thailand, people in the travel industry told Business Daily. “All tour group trips to Thailand from December 2 to December 18 have been cancelled,” said EGL Tours (Macau) Co Ltd’s general manager, Sabrina Iong Ut Iong. “Altogether we had six or seven tours cancelled, each for groups of about 20,” Ms Iong said. On December 2 the Hong Kong government warned Hong Kong people intending to go to Bangkok to adjust their travel plans and avoid non-essential travel. It issued the warning after fighting between students and supporters of the Thai government at Bangkok’s Ramkhamhaeng University on December 1 killed five people. Macau has no system for warning its people about travel abroad, but the Tourism Crisis Management Office advised Macau people going to Thailand to pay attention to the political situation there. Travel Industry Council president Andy Wu Keng Kuong said most Macau travel agencies had cancelled package tours to Bangkok since the Hong Kong government had issued its warning. “The number of tourists heading for Thailand will definitely see a drop this month due to the political situation,” Mr Wu said.

Many package tourists have opted for other places for five-day holidays, such as Malaysia, Singapore, Japan or [South] Korea Andy Wu Keng Kuong, Travel Industry Council president

Over 150,000 protesters marched through Bangkok yesterday

“But I would say the negative impact is limited to the travel agencies’ revenue, as many package tourists have opted for other places for five-day holidays, such as Malaysia, Singapore, Japan or [South] Korea,” he said.

Too much bother Over 61,300 Macau people travelled to Thailand in the first nine months of this year, 31.2 percent more than a year earlier, Statistics and Census Service data show.

Over 40,000 went independently. The rest went in tour groups. The number of Macau people visiting Thailand in package tour groups has been growing faster than the number visiting Thailand independently. The number on package tours was 81 percent higher in the first nine months of this year than a year earlier, while the number travelling independently was 14 percent higher. Ms Iong of EGL Tours

said customers had been asking her agency to cancel arrangements it had made for independent travel such as airline tickets and hotel bookings. “But in most cases customers have decided to stick to their bookings,” she said. “They have spent their money and asked for the days off, and they don’t want to go through the bother of cancelling hotel bookings.” Thai prime minister Yingluck Shinawatra has

Interest grows over Rua da Felicidade revamp

Rua da Felicidade will get an area for Cantonese opera performances

ua da Felicidade could be the next tourist hot spot for cultural creative products after a revamp, which details will be announced soon. Entrepreneur William Kuan Vai Lam said yesterday there have already been “numerous proposals” to revive the street after talks with the Cultural Affairs Bureau. There will be a performance area for Cantonese opera, a youth centre and an area for cultural creative industries on the street, next to the bustling tourist spot San Man Lo, Mr Kuan told media. Mr Kuan is the deputy managing director of Cheng Peng Cultural Centre Co Ltd, which invested 20 million patacas (US$2.5 million) to give a facelift to the street’s 138-year

dissolved the lower house of parliament in an attempt to calm the increasing political turmoil. But this failed to stop more than 150,000 protesters from marching through Bangkok yesterday to voice their demand for the removal of Ms Yingluck and the installation of an unelected government. There is no Macau tour group currently in Bangkok, the Tourism Crisis Management Office told Business Daily, based on information from the tourism industry. The office has received about 55 inquiries so far, mainly on travel safety and insurance, but no requests for assistance from residents travelling in Thailand. Ms Iong said her agency was keeping a close watch on developments in Thailand. “After December 11 we will decide whether or not to resume package tours to Bangkok,” she said. With Reuters

old Cheng Peng Theatre. The theatre has been included as part of the government revamp plan for the street, whose Portuguese-language name means ‘Happiness Street’. “We aim… to expand the scope of the culture industries of Macau, not only limited to areas like the Ruins of St Paul,” said Mr Kuan. “We hope to create more attraction sites.” His firm and the Cultural Affairs Bureau will hold a press conference to introduce a complete plan for the street “in due course”, said the businessman. Guilherme Ung Vai Meng, the bureau’s director, said last week they had already finished drafting the plan and would soon discuss it with the residents. Tou Mio Leng, president of a neighbourhood association, complained on Sunday that small businesses there were still being kept in the dark over the development. T.L.

December 10, 2013

Macau

Allow smoking rooms, gaming industry says Today is the deadline for casino with substandard air to present their plans for shrinking their smoking areas Vítor Quintã

vitorquinta@macaubusinessdaily.com

acau’s gaming establishments would like to have smoking rooms – without gaming tables or slot machines inside – to replace their smoking areas, according to the government. The Health Bureau says the six casino concessionaires and subconcessionaires have jointly petitioned

for permission to have smoking rooms. The bureau said in a written statement issued late on Sunday that it would discuss the request with the Gaming Inspection and Coordination Bureau and that they would together seek a legal opinion on the matter. Smoking rooms were suggested last month by David Chow Kam Fai, the

head of Macau Legend Development Ltd, a company that operates casinos under a service agreement. Secretary for Social Affairs and Culture Cheong U said in his Policy Address for 2014 last week that the idea “could be considered”. Health Bureau director Lei Chin Ion told reporters on Sunday: “I think it’s a good idea … just like the smoking rooms in airports, as then most of the casinos’ gaming areas would be smoke free.” Altogether, 16 casinos and slot machine parlours failed a second round of tests of the air quality in their smoking areas, and the government ordered them to reduce the size of their smoking areas. The offending gaming establishments that are still open have until today to present their plans for reducing their smoking areas. The Health Bureau said it had first given them until last Saturday to present their plans, but had put back the deadline because Sunday was a public holiday and yesterday a day off for civil servants.

Cutting it fine None of the gaming establishments required to reduce their smoking areas has presented a plan for doing so

Two of the seven Mocha Clubs slot machine parlours that were among

Transmac to work with govt to fix bus system

us operator Transportes Urbanos de Macau SARL (Transmac) says it will cooperate with the administration to fix the flaws in the bus system. But the company is “still waiting” to hear from the Transport Bureau on the future of the public bus service contracts, said Chan Hio Ieong, Transmac director and general manager. Quoted by the Chineselanguage media, Ms Chan said on Sunday it is not “immediately clear what the government’s next move” will be. The Commission Against Corruption released a hardhitting report last month describing the territory’s bus system, introduced on August 2011, as “illegal”. The government chose to sign service provider contracts instead of public service concessions with the three bus operators. The watchdog offered three solutions: turn the present contracts into concessions, end contracts and pay the firms compensation and negotiate concessions with the operators. Asked which option Transmac would prefer, Ms Chan replied: “The

final decision on all bus services has to come from the administration and the operators will cooperate with the government’s decision.” She believes the government will talk to the public operators – Transmac, Sociedade de Transportes Colectivos de Macau SARL (TCM) and Reolian Public Transport Co Ltd – after making up its mind. Chief Executive Fernando Chui Sai On said on Sunday they would mend the flaws in the system “in compliance with the existing legal provisions”. Legislative Assembly members Ng Kuok Cheong and Au Kam San filed a motion last month calling for a debate on the issue. Fellow legislators José Pereira Coutinho and Leong Veng Chai did the same. Reolian, meanwhile, was declared bankrupt on December 4, after the government and two Macau banks were unable to reach a deal to keep the firm running. The government had taken over Reolian’s operations on October 2, one day after the bus firm filed for bankruptcy because it ran out of money to pay its workers. T.L.

Transmac is one of the three bus operators here

the offending establishments have closed, but not because of their substandard air. They closed because new rules restrict slot machine parlours to fivestar hotels, to within 500 metres of a casino or to resorts in less densely populated areas. The offending casinos are the Diamond, Emperor Palace, Golden Dragon, Grandview, Jimei, Kam Pek, Lan Kwan Fong, StarWorld and VIP Legend. The Health Bureau said none of the offending establishments had yet presented its plan to reduce its smoking area. The offending establishments must also say how they intend to improve air quality throughout their premises. Chan Meng Kam, the owner of Golden Dragon, said the casino has already delivered its smoking area reduction plan to Sociedade de Jogos de Macau SA (SJM). Golden Dragon operates under SJM’s gaming concession. “Whether or not they have submitted our plan to the bureau I’m not sure,” he told Business Daily. Asked for a comment on the smoking room suggestion, Mr Chan said he would support a full smoking ban in all casinos. The Health Bureau said that along with the Gaming Inspection and Coordination Bureau and the Land, Public Works and Transport Bureau, it would consider the plans presented as soon as possible. On November 7 Mr Lei suggested that the smoking areas could be reduced by January, and said that if the offending establishments failed to deliver their plans, the authorities would abolish their smoking areas. Since the beginning of last year the law has banned smoking in at least half of any gaming establishment’s gaming floor area. With Stephanie Lai

December 10, 2013

Macau

Migrant workers exploited, human rights report says The New Macau Association decries the fees that recruiters extract from mainlanders working in Macau Tony Lai

tony.lai@macaubusinessdaily.com

igrant workers from the mainland are victims of exploitation by employment agencies that deduct commission from their pay every month, the New Macau Association says. The pan-democrat group says so in its third annual report on human rights in Macau, which was published yesterday. The report says the observance of human rights here continues to deteriorate. It says migrant workers from the mainland have “to pay a certain percentage of their wages to their employment agency on a monthly basis” as commission. New Macau Association president Jason Chao Teng Hei told a press conference that migrant workers from elsewhere had to pay commission only at the beginning of their contracts or for the first few months. Mr Chao called the way

migrant workers from the mainland were treated “systemic exploitation” and described it as “very worrisome”. The Ministry of Commerce permits 19 mainland employment agencies to send mainlanders to work in Macau. Two of the agencies are based in Zhuhai. The mainland’s rules allow employment agencies to charge each month a maximum commission of 12.5 percent of the basic pay of workers they find jobs for. Agencies cannot charge commission on overtime pay, bonuses or benefits. Mr Chao expects such exploitation to persist, despite the intervention of the Macau government. “It is difficult for this to come to an end as it is the policy of the Chinese government to allow only a few approved agencies,” he said. Secretary for the Economy and Finance Francis Tam Pak

Yuen said last month that the Macau government intended to regulate employment agencies and the fees they collected. Mr Tam said the government’s proposals could be debated next year.

The accusers accused Human Resources Office data show over 83,800 migrant workers from the mainland were employed in Macau in October, and that they made up over 63 percent of migrant workers here. Speaking more generally,

Mr Chao said: “The human rights situation has deteriorated.” He said freedom of assembly had been curtailed. “In the past, it was very rare for the people attending demonstrations to be arrested,” he said. “But now the government has started to prosecute participants.” He drew attention to charges brought against six people, including New Macau Association vice-president Scott Chiang Meng Hin, after a rally held on June 30 to demand the resignation

of Secretary for Public Administration and Justice Florinda Chan. They were accused of aggravated physical assault of law enforcers. The Public Prosecutions Office eventually dropped all the charges. Mr Chao said prosecutors were considering bringing charges of disobedience against two organisers of a rally held on October 1, on the grounds that the police had not been informed of the protest. The New Macau Association has sent its human rights report to the United Nations Human Rights Committee. Asked if the report was impartial, association member and academic Bill Chou Kwok Ping replied that it was “based on facts”. Mr Chou called for the establishment of an official body to monitor the observance of human rights in Macau.

December 10, 2013 April 19, 2013

Macau AirAsia Zest launched Manila-Macau flights Philippine low-cost carrier AirAsia Zest Air has launched its Manila-Macau flights on Friday, according to the Macau International Airport’s website. The airline will fly here from Manila three times a week, on Wednesdays, Fridays and Sundays. “Manila to Macau route is our second new route after launching Cebu-Kuala Lumpur just five days ago,” Joy Caneba, AirAsia Zest executive vice president told Philippine media. Last May, the Philippine unit of Malaysia’s AirAsia acquired a 49 percent stake in Zest Airways Inc. With the buy-in, Zest Air has since been rebranded as AirAsia Zest.

Christmas goes global Is China’s growing interest in the West also influencing Macau gaming demand? Michael Grimes

michael.grimes@macaubusinessdaily.com

he traditional Western holiday season in December may be growing in popularity with Chinese travellers to Macau. Macau’s monthly gaming revenue percentage growth year-on-year during December is often in the upper middle of the spectrum when judged against other months. In 2012, December’s take was up 19.5 percent year-on-year, compared with a high of 34.8 percent in January (coinciding with Chinese New Year) and a low of 1.5 percent expansion in July. While factors other than regular seasonal demand can come into play in monthly results – such as macroeconomics or politics – China’s increasing links with the outside world after decades of self-imposed isolation may be having an impact on holiday habits. Christmas is not an official holiday in mainland China. But the fact many of China’s Western business customers take at least a week off around the December 25 period has also led some Chinese businesses – especially in exporting regions such as Guangdong – to take a seasonal pause. Added to that phenomenon is the celebration by some Chinese of the birthday of Mao Zedong, the founding leader of the PRC, which falls on December 26 and is sometimes referred to by foreigners as ‘Mao-mas’. The Economist magazine recently reported that Maoists have urged that December 26 be declared ‘Mao Zedong shengdanjie’. The term shengdanjie means ‘sacred-birth festival’ and also happens to be the Chinese word for Christmas, states the magazine.

Numbers game In December 2012 total visitor arrivals to Macau actually fell two percent year-on-year according to data from the Statistics and Census Service. But visitor numbers from the mainland were actually 0.9 percent up, while the tally of independent travellers from China under the Individual Visit Scheme rose 5.4 percent that month.

THERE ARE THINGS WE DON’T DO

Wishing it could be Christmas every month

December 2012 also outstripped the average annual growth in 2012 for mainland tourism, which stood at 0.1 percent. In 2011, December arrivals from the mainland grew at 23.5 percent, compared to the year average for Chinese tourists of 22.2 percent. Prior to the liberalisation of the Macau casino market – when nearly all revenue was driven by Hong Kong and Taiwan VIP players – December was considered a quiet period for operators relative to Chinese New Year in January or early February.

Some of the apparent smoothing in the demand cycle for Macau gaming and tourism could simply be due to ever more mainland cities becoming eligible for the IVS scheme. Or it could be because Macau’s blend of East and West offers an even better photo opportunity at Christmas in terms of lights and decorations than any season other than Chinese New Year. Whatever the reasons, marketing professionals in the local casino industry are grasping the

BUT WE DO•••

opportunities presented. “Christmas and Western New Year are usually considered high season because people in Hong Kong have holidays and many patrons from the mainland may also visit Hong Kong and Macau to experience this special period,” says Ricardo Siu Chi Sen, associate professor of business and economics at the University of Macau. There’s more on Macau gaming at Christmas in the December edition of our sister publication Macau Business magazine.

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December 10, 2013 April 19, 2013

Macau

‘SJM Cotai’ might have different name Stanley Ho’s casino firm still undecided about branding for its foray into rivals’ territory Michael Grimes

acau casino operator SJM Holdings Ltd is ‘undecided’ about whether to use the SJM name in the headline branding for its planned Cotai resort. The suggestion comes in a report in the December edition of our sister publication Macau Business magazine, about the development of branding in the Macau casino market. Ambrose So Shu Fai, SJM’s chief executive, acknowledges however the power of the initials ‘SJM’ as well as the name ‘Lisboa’ in the market locally and with international customers. “For over 40 years customers have associated the Lisboa brand with Macau tourism and entertainment,” Mr So told the magazine. SJM Holdings controls both the Grand Lisboa and the Hotel Lisboa casino-hotels. He says even the gaming operator’s name is appealing to customers. “SJM is a key brand for us, as is Lisboa.” However, the gaming operator is undecided about using either name on its Cotai casino resort, which will include Asia’s first Palazzo Versace hotel. Were SJM also to eschew even

the use of the word ‘Cotai’ in its new property there, it would pose an interesting challenge for marketing and branding consultants, given the consumer recognition of ‘SJM’ and of ‘Cotai’. Only one concessionaire so far – Las Vegas Sands Corp – has incorporated the word ‘Cotai’ into a casino resort name; namely the US$4 billion-plus (31.95 billion patacas) Sands Cotai Central. The company has also made legal efforts locally to incorporate the name ‘Cotai’ as a trademark in some of its branded services The name Cotai did not start life as a branding – being a conflation of the names Coloane and Taipa and indicating the uniting of the two islands via a landfill causeway that eventually created a seamless join. But the efforts of LVS to trademark in Macau several brands using the words ‘Cotai’ or ‘Cotai Strip’ as part of its marketing strategy have so far been challenged successfully in Macau courts. Market rivals Melco Crown Entertainment Ltd and Cyber One Agents Ltd – an entity in the Studio City project majority owned by Melco

Not such a gas for exporters But end of Macau’s special EU trade status does little harm to city’s services-based economy

as masks and other “breathing appliances” are some of the more unusual things that Macau exports to the European Union according to Macau Economic Services bureau. But that won’t be enough to revive the boom days of Macau exports. In a new milestone emphasising the city’s move from an industrial to services economy, from January, Macau will lose privileged access to the European Union’s 500 million consumers. The city will be removed from the list of countries and territories entitled to reduced- or zero-import tariff rates under the European Union’s import preference scheme, known as the Generalised Scheme of Preferences. It covers a wide range of product categories. In the 1980s and 90s it was common to find a ‘Made in Macau’ label in textiles and footwear sold in Europe. But a combination of factors including the opening of mainland China to export business and the casino gaming boom ended that. Beyond gaming, Macau still has potential as an arbitrator for Portuguese-speaking countries trading with China, and as a staging post for European entry into the mainland market. The arbitration issue was mentioned at the Forum for Economic and Trade Cooperation between China and the Portuguese-speaking Countries held here in November. Gao Hucheng, Chinese minister of commerce, suggested Macau would

Struggling on – Macau’s factories an endangered breed

be the legal jurisdiction China will use for settling any business disputes between firms from mainland China and lusophone nations. Macau’s status as a jurisdiction where trade settlement can be done in China’s currency the yuan and where personal bank accounts can be held in the currency also offers opportunities for Sino-European trade. That point was emphasised last month with the opening here of a new European Chamber of Commerce. To emphasise the importance the EU places on Macau’s go-between role, the chamber was officially inaugurated by European Commission President José Manuel Barroso. For more on the Macau-EU relationship, read Macau Business magazine, on sale this week. M.G.

Photo by Manuel Cardoso

Michael.grimes@macaubusinessdaily.com

Crown – have both opposed such trademarking. Galaxy Entertainment Group Ltd avoided the name ‘Cotai’ when it created branding for its flagship Cotai project, choosing the term ‘Galaxy Macau’ instead. Wynn Resorts Ltd’s plan for a US$4 billion Cotai resort was commonly referred to by the media as ‘Wynn Cotai’ in its early days. The company also used the term ‘Wynn Cotai’ in a gaming investment forum presentation in September 2012. But in late July this year, the

firm announced it would instead be known as Wynn Palace. MGM China Holdings Ltd talked about ‘MGM Cotai’ in a press release on February 27 this year when describing its own “approximately HK$20 billion” new resort. But whether that working title will stay as the project moves nearer to completion in “early 2016” – a timing it reiterated in a Hong Kong filing in October – remains to be seen. For more on Macau casino branding issues, see the main cover story in the latest edition of Macau Business.

December 10, 2013 April 19, 2013

Greater China Beijing loosens grip on interest rates China has taken another step loosening its grip on interest rates as it looks to liberalise its financial sector. The central bank has said it will allow banks to trade deposits with each other starting yesterday, using a financial product called certificates of deposit. The interest rate on the certificates will be determined by the market. The minimum amount for an individual certificate of deposit will have to be 50 million yuan (US$8.2 million) and banks will also have to inform the central bank in advance about how much they plan to issue in a year.

China inflation slows State firms to lead US on lower food prices Companies, underwriters seen ‘more rational’ Data offer room to push ahead with financial reforms

Kevin Yao

Food prices rose 5.9 percent in November from a year earlier

he mainland’s annual consumer inflation unexpectedly slowed in November, easing market fears of any imminent policy tightening as authorities meet this week to outline their policy and reform priorities for 2014. Rising money market rates and bond yields indicate the People’s Bank of China (PBOC) is tightening liquidity conditions, to reduce debt levels and contain credit growth, but there is little sign of a sharp turnaround in monetary policy. Annual consumer inflation unexpectedly slowed to 3 percent in November from an eight-month high of 3.2 percent, the National Bureau of Statistics said yesterday. Analysts had expected the inflation rate to hold steady at October’s level. “Inflation will not be a big problem in the coming months and we expect monetary policy to stay neutral,” said Luo Wenbo, an economist at Xiangcai Securities Co Ltd in Shanghai. From a month earlier, consumer prices fell 0.1 percent, the first fall in six months and a touch weaker than market expectations they would be flat. “While headline inflation could moderate further in December, due to a high base last year and the PBOC maintaining a tightening bias on liquidity, upward pressures on inflation remain,” Jian Chang, China economist at Barclays Capital in Hong Kong, said in a research note. Producer prices fell 1.4 percent in November from a year earlier – the 21st consecutive month of decline – versus a fall of 1.5 percent in the previous month, the bureau said. On a monthly basis, producer prices were unchanged. A strong jump in exports and a run of surveys of factory and service

sector activity indicate the world’s second-largest economy has regained some momentum since arresting a protracted slowdown in the middle of the year. But data on factory output, fixed-asset investment and retail sales due today are expected to show some moderation, consistent with expectations annual growth will slow slightly in the fourth quarter from the third. A Reuters poll in October showed annual growth was forecast to slow to 7.5 percent in the final quarter of 2013 from 7.8 percent in the September quarter. Full-year growth was forecast at 7.6 percent – the weakest in 14 years, but just ahead of the government’s target of 7.5 percent. China’s leaders have said they will accept slower growth as they try to remake the economy so it is not dependent on investment and exports and instead driven by consumption, services and innovation, which they consider more sustainable. Top government think tanks, which make policy proposals for the leadership, are debating whether the growth target should be cut to 7 percent in 2014, but the official China Securities Journal said the government would probably keep it at 7.5 percent. “Reform is more important than growth, but that does not mean that we will allow a ‘hard landing’ in China’s economy. We need appropriate economic growth to help maintain employment and social stability,” the paper said in a front-page commentary. “Economic growth target for 2014 is more likely to be maintained at around 7.5 percent,” it said. Reuters

eijing’s decision to end a 15-month freeze on initial public offerings may unleash at least US$11 billion of share sales in next year’s first half. More than 760 mainland Chinese companies are waiting to go public, their plans halted when regulators imposed the moratorium in September 2012 as they drafted rules aimed at curbing price manipulation. State-owned companies are expected to be among the first to list. Shaanxi Coal Industry Co plans to seek as much as US$2 billion, two people with knowledge of the matter said, while China Postal Express & Logistics Co, the nation’s biggest package shipper, may raise US$1.5 billion. The IPOs underscore companies’ pent-up need for cash even as Chinese stock valuations are near a decade low. “It’s going to be good for everyone,” said Eric Jackson, president of Ironfire Capital LLC, a Florida-based hedge fund that invests in Chinese stocks. “The Chinese can only invest in domestic stocks, so deciding to loosen the rules on IPOs will give Chinese more places to invest and hopefully take some air out of the property bubble.” The US$11 billion estimate for IPOs was calculated by Bloomberg News based on the filings of 76 companies that have been approved or are close to getting approval to sell shares on the Shanghai and Shenzhen main boards. It doesn’t include IPOs on the ChiNext market for startup companies. Fifty companies will be ready for share sales by the end of January, according to the China Securities Regulatory Commission. The proceeds could help ease the pressure on increasingly indebted Chinese companies, who owe interest equal to 12.5 percent of the country’s economic

Chinese stock valuations near decade-low

output, according to a September 18 report from Fitch Ratings. That’s up from 7 percent in 2008.

Increased production In the first half of 2013, only the U.S. hosted more than US$11 billion of initial offerings, data compiled by Bloomberg show. Companies planning IPOs in China

Regulator to launch tax deferred pen

Policy may add 300 billion yuan to fund man

hina will launch a 401K-style tax-deferred pension investment scheme in January 2014, potentially boosting stock and bond market performance as new funds enter China’s capital markets. The policy will allow employees to set aside a tax-deferred portion of their salaries for investment in pension funds, improving returns on investment for Chinese savers and at the same time supporting wider market liberalisations. State media reported the new policy yesterday, citing a statement on the Ministry of Finance website

dated December 6, jointly issued with the Ministry of Taxation and the Ministry of Human Resources and Social Security. Chinese stock investors have been eagerly awaiting the liberalisation of pension fund investment rules, which currently lock most state-run pension funds into highly secure but low-yielding government bonds. A research note by Hua Chuang Securities said the new policy could potentially pour a fresh 300 billion yuan (US$49 billion) per year into China’s fund management industry, adding that current participation in

December 10, 2013 April 19, 2013

Greater China China Everbright to launch HK IPO today China Everbright Bank Co Ltd said it will launch an up to US$2.8 billion Hong Kong share offering today to raise funds to bolster its balance sheet. The Shanghai-listed bank aims to sell 5.1 billion shares at an indicative price of HK$3.83 to HK$4.27 each, the mid-sized Chinese lender statement in a statement yesterday. That would make the deal worth up to HK$21.8 billion (US$2.8 billion). China Everbright Bank received commitments worth US$1.74 billion from 19 so-called cornerstone investors including China Shipping (Group) Co and Prudential Financial Inc , its prospectus showed.

Alibaba investment drives Haier to 14-year high

$ 11 bln IPO revival in pricing IPOs

Online giant to invest HK$2.82 billion in appliance maker

760

Mainland firms waiting to go public

must include figures outlining the use of proceeds in their draft prospectuses. The final amount raised may deviate from those estimates. Shaanxi Coal, based in Xi’an city in western China, plans to raise money in next year’s first half to finance increased production, said the people familiar with the matter, who asked not to be named as the deliberations are private.

China Postal Express, which has more than 45,000 outlets, is struggling to keep pace with a domestic delivery market growing 20 percent a year. The courier, which has trailed industrywide growth since 2009, intends to use the proceeds to increase its trucks, airplanes and distribution centers, according to its IPO prospectus. China Railway Materials Co, a logistics firm and steel supplier, may raise about US$1 billion to expand its logistic bases and operating networks, a person with knowledge of the proposed deal said. Huaibei Mining Co, a coking-coal producer in eastern China, may seek about US$1 billion, according to a person with knowledge of its plan. Officials at the four state-owned companies declined to comment or weren’t immediately available. Chinese regulators announced the plan to end the freeze on November 30, while also introducing new rules intended to stamp out price manipulation that had produced excessively high valuations for companies going public. The regulator “has made it abundantly clear that it is determined to clamp down on” overpriced deals, said Zhang Qi, a Beijing-based analyst at Zero2IPO Group. “Companies and underwriters will definitely be more rational in pricing IPOs.” Bloomberg News

Alibaba will also buy HK$1.32 billion worth of convertible bonds which can either be turned into shares in Hong Kong-listed Haier or a 24.1 percent stake in the joint venture. It will also subscribe to about 2 percent of Haier Electronics’ enlarged share capital for HK$965 million, the statement said. The funds are expected to be used to expand Haier’s warehouse capacity, network development, and online-to-offline integration, it added. “The logistics for large-size goods is the next nut for Alibaba to crack,” said James Roy, senior analyst at Shanghai-based China Market Research Group. “It is a very complicated and difficult sector to get a lot of control over it. Alibaba has put a lot of sweat into how to build that capability up.” The Alibaba-Haier deal is the latest of several acquisitions by the the Chinese e-commerce giant which says it is investing US$16 billion in logistics and support by 2020 to open up China’s vast interior and bring access to hundreds of millions of potential new customers.

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nagement industry annuity schemes in China is very low. China shares kicked off the week on a sluggish note yesterday, with the banking sector a drag following a series of reports on financial reforms ahead of a key central economic work meeting that will set policy goals for the new year. The CSI300 of the leading Shanghai and Shenzhen A-share listings ended down 0.1 percent at 2,450.9 points. The Shanghai Composite Index finished up 0.1 percen Domestic investors are still concerned that the resumption of initial public offerings IPOs set to start in January will have a net dilutive

libaba Group Holding Ltd will invest HK$2.82 billion (US$361 million) in appliance maker Haier Electronics Group Co Ltd in a deal aimed at expanding the Chinese e-commerce giant’s logistics reach to the millions of consumers in China’s vast interior. Online retail is booming in China and market leader Alibaba is seeking to develop Haier’s distribution network for large-sized goods into a logistics platform that will reach lesser developed cities and which other companies can also use. For Haier, the partnership with China’s biggest e-commerce firm will further its expansion into online retail and logistics, a strategy aimed at giving it an edge in the fierce battle for margins in the world’s biggest appliance market. Shares in Haier, in which KKRbacked Qingdao Haier Co Ltd owns a 47.8 percent stake, soared 20 percent to their highest in nearly 14 years after the deal was announced. The stock was up 13 percent to HK$21.05, the highest close since July 1999. “This collaboration with Haier Group is a win-win-win partnership,” Jack Ma, executive chairman of Alibaba Group, said in a joint statement. China’s vast interior is expected to see rapid retail growth as more people move into urban areas and their spending power increases. The agreement will see Alibaba acquiring a 9.9 percent stake in Haier’s online marketplace Goodaymart, which under the joint venture, will form the basis of a logistics platform for large-sized goods that can be used by other companies as well.

effect on valuations. The logic is that if no new money enters the stock market, more company listings can only cannibalise capital from other company shares, driving down prices. Appearing to understand this concern, regulators have accompanied announcements about the IPO resumption with suggestions that other policies will be implemented to offset the dilutive impact, including the issuance of preferred share schemes and the potential injection of fresh capital from pension funds. Reuters

Reuters

10 10

December 10, 2013 April 19, 2013

Greater China

HK real estate industry ‘crying for help’

HK agents leaving market amid home-price curbs Thousands of real estate agents to lose jobs as home transactions fall Kelvin Wong

s many as 10,000 real estate agents in Hong Kong are forecast to lose their jobs, according to Centaline Property Agency Ltd, as the government presses ahead with measures to rein in house prices that have more than doubled since 2009 and hit a record high in March. Because of the cooling measures, home transactions fell to 27,714 in the first half of the year, the lowest since data were first available in 1996, according to the Land Registry. Chu Kin Lan has already shuttered six of 11 offices of her Hong Kong real estate agency and let go half of her 70 employees amid the city’s toughest curbs on home buying in its history.

Shanghai starts week shrouded in smog S

hanghai entered a second week shrouded in smog as China’s commercial hub reported levels of the most-harmful air pollutants that were 12 times the maximum recommended by the World Health Organisation. City authorities warned children and the elderly to stay indoors and avoid outdoor activities as PM2.5 air pollution reached 309.5 micrograms per cubic metre as of noon yesterday, the city’s environmental monitoring centre said on its website. It hit a record high of 602.5 on Friday, according to the Shanghai Daily newspaper. The particles that are smaller than 2.5 microns in diameter are more dangerous than other particulate

The worst pain may be still to come. “We’re getting killed by the government here,” said Ms Chu, who has operated her Bo Fung Property Agency Group in Hong Kong island’s district east of Causeway Bay since 1984 and now sees some of her vacated branches replaced by eateries. “This is by far the worst I’ve experienced. Almost every agency I know is losing money and closing shops.” The government has raised the minimum mortgage down payment six times since 2010 and imposed taxes including a doubling of the stamp duty on deals of more than HK$2 million (US$258,000) in February, plus an extra 15 percent

matter, according to the WHO. Shanghai pegged the air quality level at 220, or “heavily polluted,” according to its own monitoring system. The local government ordered vehicles off the road and factories to cut production after pollution reached hazardous levels on December 6. Heavy pollution may undermine plans for Shanghai, the nation’s commercial hub, to attract foreign investment and multinational firms, as the city implements a free-trade zone as part of a broader goal to become a global financial and logistics centre by 2020. “Steps taken by the Shanghai government to alleviate pollution aren’t enough,” Huang Wei, who works on climate and energy issues for Greenpeace in Beijing, said yesterday. “Smog brings a huge health risk to the public and definitely affects multinational companies’ investment decisions and makes them hesitate before sending foreign employees to China.” The pollution is coming from coal power plants and factories such as cement works in the provinces of Jiangsu, Anhui and Shandong, Greenpeace China said on its website. Bloomberg News

levy on non-resident buyers. Prices have only come down about 3 percent since March, and the city remains one of the world’s costliest places to buy a home, according to property broker Savills Plc.

Worst ahead Home transactions in Hong Kong will probably drop about a third from 2012 to as low as 52,000 this year, the fewest since 1996, according to Knight Frank LLP. The number may fall to 45,000 next year, said the London-based property broker. “The worst is yet to come,” said Angela Wong, an executive director at Hong Kong-listed Midland Holdings Ltd. “The pressure on brokers won’t go away as long as deal numbers stay at such low levels. It’s clear the government will impose more measures whenever they see things pick up slightly.” Government officials, including Chief Executive Leung Chun Ying and Norman Chan, head of the central bank, have repeatedly said the measures would stay in place until a steady supply of new housing is available to home buyers. Mr Leung has said he will try to boost supply by accelerating land sales and the approval process for new home sales. “The government is getting stuck in the middle,” said Eddie Hui, a professor in the real estate and construction department at Hong Kong Polytechnic University. “They understand what the agents are going through, but on the other hand, if they don’t go hard with the measures, the bubble will burst at some point and the property market will be in for a hard landing.” Industry lobby groups, including the Hong Kong Real Estate Agencies General Association of which agencyowner Ms Chu is the chairman, have staged street protests and pleaded with lawmakers to pressure the government into withdrawing some of the curbs. Ms Chu, whose association represents more than 1,400 brokerages, estimated about 15 percent of the agents have left the industry this year.

The number of registered individual real estate salesman and agent licence holders fell for the seventh straight month to 36,075 at the end of November, down from 37,173 in April, according to the Estate Agents Authority, a body set up by the government to regulate the industry. That number will probably show a bigger decline over the next few months as holders choose not to extend their licences when terms expire, Chu said. Individual brokers need to renew their licences every year or two at a minimum cost of HK$2,010 annually. “I just couldn’t see much future,” said Brian Ma, 27, who left his job at a property agency in July and is now a trainee at a securities brokerage firm. “I went a few months without getting a deal. It was just really tough to wait around.” Mr Ma had been an agent in Hong Kong’s southern Aberdeen district for four years and was earning about HK$20,000 to HK$40,000 a month prior to late 2012, when the government stepped up the property restrictions. “The smaller brokerages are the ones taking the bigger hits,” said Sherman Lai, chairman of Centaline, the city’s largest closely held real estate agency, which has about 300 branches and 4,000 staff. “They pay high rents themselves and face falling transactions.” Bloomberg News

KEY POINTS Home transactions to drop about a third – Knight Frank Prices down about 3 percent since March 10,000 agents could lose their jobs, Centaline says About 15 pct of agents left the industry this year

11 11

December 10, 2013 April 19, 2013

Asia

Thai crisis deepens as PM calls election Parliament dissolved as opposition gears up for ‘final push’ against Yingluck

hai Prime Minister Yingluck Shinawatra dissolved parliament and called for fresh elections as anti-government protesters began converging on Government House in Bangkok to push for her ouster. “The government doesn’t want the country and the Thai people to suffer more losses,” Ms Yingluck said yesterday in a speech broadcast on state television. “Returning power to voters is in line with the parliamentary democracy. We want all of you to see the importance of the election.” The demonstrators who started marching to her office want Thailand’s democratic system replaced by an unelected council, and earlier said protests wouldn’t end even if Ms Yingluck stepped down or dissolved parliament. Ms Yingluck’s opponents have said their goal is to rid the country of the political influence of her brother, Thaksin Shinawatra, whose allies have won every election since his ouster in a 2006 coup. Opposition lawmakers quit parliament en masse on Sunday to join the protests. Suthep Thaugsuban, the former Democrat party lawmaker who is leading the protests, said last week he would end the rallies yesterday if demonstrators did not achieve their goal. “The house dissolution won’t stop our march to Government House,” Satit Wonghnongtaey, another

protest leader, told supporters gathered at Bangkok’s Democracy Monument yesterday, according to a live broadcast on Bluesky Television, which is affiliated with the Democrat party. “We’ve made it clear that the house resolution is only one of our goals,” Mr Satit said. “Yingluck and her ministers are still acting and have the power. We want the government to quit their acting posts and form a parliament of the people.” Under section 108 of Thailand’s constitution, the date of an election will be fixed by a royal decree 45 to 60 days after the House of Representatives is dissolved.

since Bloomberg began collecting the data in 1999. The rallies began more than a month ago to oppose a proposed amnesty law that Ms Yingluck’s critics said would benefit her brother. Mr Thaksin has lived in selfimposed exile since fleeing abuse of power charges in 2008, and has helped guide policy from abroad since Ms Yingluck led the Pheu Thai party to victory in a 2011 election. After the amnesty legislation was rejected by the Senate last month,

Rubber bullets

Amnesty push The demonstrators accuse parties linked to Thaksin of vote-buying and Ms Yingluck’s administration of corruption and economic mismanagement. They have called for an appointed committee of “good people” to implement political reforms before handing power to a new, elected government. Thailand’s benchmark SET Index has dropped 1.6 percent this quarter, poised for its third straight quarterly slide. That would be the longest quarterly decline since 2009. Foreigners have sold a net US$5.53 billion of Thai stocks this year, on course for the biggest annual outflow

the protesters switched their goal to dismantling Mr Thaksin’s political network. Parties linked to the former premier have won the past five elections on support from voters in northern and northeastern provinces. “The government hasn’t taken responsibility for its attempt to pass the amnesty bill,” Democrat party leader Abhisit Vejjajiva said at a briefing late on Sunday. “The government also rejected the Constitutional Court’s authority, so it lost legitimacy to govern.”

Returning power to voters is in line with the parliamentary democracy. We want all of you to see the importance of the election Yingluck Shinawatra, Thai Prime Minister

Mr Suthep was a former deputy premier with the Democrat party, which hasn’t won a national poll in more than 20 years. He faces murder charges for his role in helping oversee a deadly crackdown on supporters of Mr Thaksin in 2010 when the Democrats were in power. Courts issued two warrants for his arrest last week, including one on a charge of insurrection, which carries a penalty of life imprisonment or death. Ms Yingluck and Mr Suthep said each side will avoid violence, and the police said at a separate briefing that security forces will carry only shields and batons, after they were criticised for using rubber bullets on violent protesters last week. Bloomberg News

Protesters took to the streets again yesterday

India opposition eyes 2014 win I

ndia’s main opposition party won the most seats in four local polls held over the past month, giving it momentum ahead of a 2014 national election as voters punished Prime Minister Manmohan Singh’s ruling coalition. The Bharatiya Janata Party was poised to wrest power from Mr Singh’s ruling Congress party in both the western state of Rajasthan and the capital Delhi, where it’s

battling the upstart Aam Aadmi Party, according to the Election Commission of India, which tallied votes on Sunday. The BJP also won another term in Madhya Pradesh and Chhattisgarh states. Counting in Mizoram state began yesterday. “We’ve become the frontrunner as far as national politics is concerned,” Arun Jaitley, a senior BJP leader, said in televised comments. “We’d have been happier

with a few more seats in Delhi, but we’re reasonably within handshaking distance of the majority.” BJP victories in areas holding about a sixth of India’s 1.2 billion people would give it momentum to end the Congress party’s decadelong rule in elections due by May 2014 and install Narendra Modi as prime minister, an outcome favoured by investors. India’s benchmark stock index will climb as much as 6 percent to a record by year-end if the BJP confirms exit poll predictions of winning four of the five state votes, according to the average of 10 estimates compiled

by Bloomberg. “The state poll results indicate a wave in favour of the BJP and against the Congress,” Aneesh Srivastava, chief investment officer at IDBI Federal Life Insurance Co, said by phone. “If it is able to sustain the momentum then it can benefit in next year’s national elections. People have voted for change.” In Delhi, the BJP had 31 seats against 28 for the Aam Aadmi Party, which campaigned against corruption in contesting its first election. The incumbent Congress party had 8 seats in the capital, according to the commission. Reuters

December 10, 2013

Asia

Japan’s economic growth revised down Government posts surprise current-account deficit

Australia’s IPO resurgence to keep bankers busy Deals expected to rise to about US$6 bln this year

Japan has taken a series of steps to revive domestic demand

apan’s growth slowed more than initially estimated in the third quarter and the current account unexpectedly fell into deficit in October, underscoring headwinds to Prime Minister Shinzo Abe’s recovery drive. Gross domestic product expanded an annualised 1.1 percent from the previous quarter, a revision from 1.9 percent, the Cabinet Office said yesterday. Japan posted a 128 billion yen (US$1.2 billion) shortfall in its broadest trade gauge, according to the finance ministry. Weaker-than-estimated business spending contributed to the downward revision in the GDP report, indicating that Japan Inc isn’t committing to investment. Mr Abe is trying to instil confidence in companies that his policies will cement growth, saying in an interview last week he wants them to increase wages faster than gains in the cost of living. “Companies are quite cautious about the outlook for the economy,” said Junichi Makino, chief economist in Tokyo at SMBC Nikko Securities Inc. S t ill, analysts were optimistic about the mediumterm outlook. “There are already signs that exports and capital expenditure are recovering, so I am not pessimistic about the outlook,” said Yasuo Yamamoto, senior economist at Mizuho Research Institute

in Tokyo. “Economic growth should start accelerating again in the fourth quarter as domestic demand strengthens before the sales tax increase.”

for October in comparable data back to 1985. The value of imports reached a record high for the month. Reuters/Bloomberg News

Business spending Business spending was unchanged in the third quarter from the previous period, down from a preliminary estimate of 0.2 percent growth. A smaller contribution from inventories also led to the downward revision in growth, according to the Cabinet Office. The cabinet last week approved an 18.6 trillion yen economic package to cushion the blow from the 3-percentage-point sales-tax bump. The measures that includes 5.5 trillion yen in spending are projected by the government to boost real GDP by about 1 percent and create about 250,000 jobs. Yesterday’s data show the expansion slowed from an annualised 3.6 percent in the April-June quarter. The economy is projected to grow 3.6 percent this quarter and 4.8 percent in the January-March period, according to a separate Bloomberg News survey. A 4.5 percent contraction is forecast for the second quarter of 2014 after a salestax increase to 8 percent in April from 5 percent now. The trade deficit in the current account was the first since January, and the biggest

Business mood improves Japanese business confidence improved in the three months to December and is predicted to continue rising, a Reuters poll showed yesterday, adding to evidence of a steady recovery in the world’s third-largest economy. The positive outcome suggests the central bank’s closely watched “tankan” quarterly survey, due out on December 16, will show a continued recovery in business sentiment as the benefits of premier Shinzo Abe’s stimulus policies broaden. The Reuters Tankan, which has a close co-relation to the BOJ’s tankan survey, showed the indexes gauging sentiment for manufacturers and service-sector firms both improved five points from three months ago. Manufacturers’ business confidence rose for a second straight month in December to hit a three-year high, as the weak yen helped boost exports of cars and electronics goods.

ankers in Australia have much to cheer this Christmas as fees from underwriting IPOs surge 10-fold this year, and many are now betting on an equally active year in 2014 as a slew of private equity exits keep the market busy. In 2013, companies are expected to have raised about US$6 billion through initial public offerings, a six-fold jump from last year and the highest since 2010, according to Thomson Reuters data. Yesterday, shares in education training provider Vocation Ltd opened up 10 percent on their A$1.89 offer price after the company raised A$253 million (US$230.19 million) in its IPO. Vocation last traded at A$2.06, giving the company a market capitalisation of A$412 million. The company’s upbeat open comes after a strong performance from peers Navitas Ltd and G8 Education Ltd said Evan Lucas, IG’s market strategist. Navitas’ shares are up 27 percent so far this year, while G8’s have risen 89 percent in the same period. “It’s in the right area, it’s in the right industry, it’s certainly getting the attention that it requires, and that’s why you’ll probably see Vocation doing quite well today as well,” Mr Lucas said. The rush of listings, most of which are concentrated in the last two months of the year, have led some bankers to predict an IPO pipeline of at least US$5.46 billion next year, defying a slowing domestic economy weakened by falling commodity prices. The resurgence follows two lean years in 2011 and 2012 when investor appetite for new issues slumped due to

global economic uncertainty and a rash of poor secondary market performances. “In Australia, we’ve been through a series of interest rate cuts... and that combination of historically low rates plus confidence around the global growth picture as well as lower volatility has attracted a lot of investors back into equities,” said Hugh Falcon, co-head of equity capital markets for Australia and New Zealand at Macquarie Group Ltd. The Australian IPO market has been the thirdbusiest in the Asia-Pacific region – behind Hong Kong and Singapore – rising from the 10th place in 2012, Thomson Reuters data shows. The estimated fees from underwriting IPOs in Australia has jumped to US$110 million this year, according to Thomson Reuters/Freeman Consulting, with home-grown Macquarie dominating the league table followed by Swiss bank UBS AG. “The challenging environment of the last four or five years meant the IPO windows that have occurred were very short. This has meant we have witnessed a lot of pent-up demand from issuers to go to market in recent months,” Mr Falcon said. Reuters

KEY POINTS Australia IPO deals set to rise six-fold Fees for underwriting IPOs up 10-fold Bankers predict busy IPO market next year

Buying into new listings has been more profitable for investors

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December 10, 2013

Asia Rajan plans bonds to lure savings India will offer bonds to protect individuals from the fastest consumer-price gains among major Asian economies, encouraging households to invest their savings in financial products instead of buying gold. From midDecember, retail investors can buy 10-year notes that will pay the inflation rate plus 1.5 percent, the Reserve Bank of India said on November 29. Consumer prices rose 10.1 percent in October compared with a 3.2 percent gain in China and 1.54 percent in Thailand, official data show. Existing securities are linked to the wholesale-price index, which climbed 7 percent. The new securities will help central bank governor Raghuram Rajan boost the savings rate from a 2008 low. Better protection against livingcost swings may limit demand for bullion as a store of value in the world’s biggest goldconsuming nation and cut the government’s reliance on import curbs. “The consumer-price linked bonds are going to see strong demand because inflation is going to be high for quite some time,” Mohan Shenoi, head of treasury at Kotak Mahindra Bank Ltd in Mumbai, said. “Initially they will draw away some of the flows from gold.”

NZ house prices at record in Nov New Zealand house prices edged to a record high in November, with strong growth in the nation’s two main cities, with the central bank’s lending restrictions still not seen having much impact, government property valuer Quotable Value (QV) said. QV’s residential property index rose 9.2 percent in the year to November 30, compared with an 8.9 percent annual rate in October. The index is now 11 percent above the market’s previous peak in late 2007. The inflation adjusted national index fell fractionally to post a 7.7 percent annual gain, but was still 4.3 percent higher than the market peak. Prices in the biggest city Auckland and earthquake damaged Christchurch were still leading the rest of the country, with lack of supply remaining a major factor in both cities. Auckland prices rose 15.2 percent in the year to November, and in Christchurch they were up 12.4 percent in the past year, spurred by limited supply.

Analysts bullish on Kospi record South Korea’s equity market trading at a discount to the region

outh Korea’s equity strategists say the Kospi index will rise to a record in 2014 as export earnings climb and Asia’s lowest valuations lure foreign investors. The benchmark gauge for the nation’s US$1.2 trillion equity market will rally 18 percent next year to 2,341, above its record close of 2,228.96 in May 2011, according to the average forecast in a Bloomberg survey of 15 strategists at firms from Goldman Sachs Group Inc to UBS AG. The MSCI Asia Pacific Index will probably gain about 12 percent next year, according to analyst estimates compiled by Bloomberg. South Korea’s record currentaccount surplus and growing exports spurred overseas investors to buy a net US$13.5 billion of the country’s shares in the second half, as the prospect of reduced U.S. Federal Reserve stimulus increased the appeal of Asia’s strongest economies. The Kospi’s price-to-book ratio is 29 percent lower than that of the regional index, even after the South Korean gauge rose 11 percent from this year’s low in June. “Next year’s global recovery will be robust,” Goohoon Kwon, the chief Korea economist and strategist at Goldman Sachs who has a target of 2,350 for the Kospi, said in a phone interview. “Earnings are bound to rise. We have more confidence about our target for next year.” Kospi index profits will probably climb 18 percent in 2014, Mr Kwon said. He favours stocks most tied to economic growth, including electronic-equipment makers, construction companies

The Kospi index has just burst above 2,000

and metals producers. Asia’s fourth-largest economy is benefiting from the combination of faster expansions in developed countries and growing demand at home, according to Clive McDonnell, an equity strategist at Standard Chartered Plc in Singapore. Consumer confidence is the highest since February 2011, according to the Bank of Korea. Gross domestic product increased 3.3 percent in the third quarter, the fastest pace in almost two years, and the central bank expects growth to accelerate to 3.8 percent next year. “Both external and domestic

Bloomberg News

Singapore arrests 27 after Sunday’s riot

S.Lanka keeps rates steady Sri Lanka’s central bank kept key policy interest rates steady yesterday for the second straight month as expected, saying the outlook for inflation remains favourable. The current monetary policy stance is appropriate, the central bank said in a statement, after slashing rates by 50 basis points in October to stimulate the economy. The repurchase rate and reverse repurchase rate were left at 6.50 percent and 8.50 percent, respectively. Sri Lanka has already cut its key policy rates by 125 basis points and commercial banks’ statutory reserve ratio by 200 bps since December last year. “The outlook for inflation continues to remain favourable supported by subdued international commodity prices, improved domestic supply conditions and well contained demand driven inflationary pressures,” the central bank said in a statement. “In this background, according to current projections, inflation is expected to remain benign, at mid-single digit levels throughout 2014 as well.” The economy is forecast to grow more than 7 percent this year after it grew 6 percent, 6.8 percent, and 7.8 percent in the first three quarters, respectively.

demand should add tailwinds to equity markets next year,” Mr McDonnell, who raised his recommendation on South Korea to overweight from underweight, wrote in a December 5 report. His 2,400 forecast for the Kospi is tied for the second-highest among strategists surveyed by Bloomberg after the 2,420 estimate from Woori Investment & Securities Co. The average projection of 2,341 was compiled using the high-end estimate from strategists who provided a target range. The average of eight low-end estimates for the Kospi was 1,903.

The violence erupted late on Sunday night, sparked by a fatal bus accident

rime Minister Lee Hsien Loong said those responsible for Singapore’s first riot in four decades would face “the full force of the law” after about 400 people were embroiled in violence in its Indian quarter. “Whatever events may have sparked the rioting, there is no excuse for such violent, destructive, and criminal behaviour,” Mr Lee wrote

on his Facebook page yesterday. “We will spare no effort to identify the culprits and deal with them.” He urged Singaporeans to “stay calm”. Singapore’s police force arrested 27 people after the riot, which broke out in the Little India district after a traffic accident. Police officers were injured and vehicles damaged, with about 300 officers deployed to contain the situation, Commissioner

of Police Ng Joo Hee said at a briefing on Sunday night. More arrests will be made, Ng said. Large-scale demonstrations have been almost unknown in Singapore since race riots in 1964 killed 36 people and contributed to the island’s ouster from the federation with Malaysia. Singapore and Malaysia were united from 1963 to 1965. Clashes between the Chinese and Malay communities culminated in race riots in 1969 in Malaysia, which spilled briefly into Singapore. After the violence of the 1960s the Singapore government imposed curbs on public assembly. “What eventually transpired in terms of a riot – that’s a new thing, that’s definitely a watershed of a kind,” Bilveer Singh, an associate professor at National University of Singapore’s department of political science, said by phone. “I don’t think we have seen this for decades now.” The violence began after a bus ran over and killed a 33-year-old Indian worker, Deputy Commissioner of Police T. Raja Kumar said. Eighteen people, including four Singapore Civil Defence Force officers, were taken to hospital for treatment, with 10 police officers hurt, Mr Kumar said. Nine SCDF vehicles were damaged in the riot, with five vehicles burnt, including three police cars, the SCDF said in a posting on its Facebook page. Bloomberg News

14 14

December 10, 2013 April 19, 2013

Markets Gaming Stocks - Daily Performance (Hong Kong Stock Exchange) 64.1

95.90

64.0

95.65 29.1

63.9

95.40

63.8

average 63.883

Min 63.6

Last 63.95

29.0

95.15

63.7 Max 64.95

29.2

63.6

Max 95.85

average 95.408

Min 94.9

Last 95.35

94.90

Max 29.2

average 29.05

Min 28.9

28.9

Last 29.2

63.50

25.9

33.7

63.15

25.7

33.5

62.80

25.5

62.45

25.3

33.3 33.1

Max 63.5

average 62.960

Min 62.15

Last 62.9

62.10

Max 25.8

average 25.520

Commodities PRICE

DAY %

YTD %

97.8

0.153609831

4.946882713

107.9400024

85.45999908

BRENT CRUDE FUTR Jan14

111.5

-0.098557477

6.770085225

113.3099976

96.13999939

GASOLINE RBOB FUT Jan14

273.22

0.194359896

7.762088822

287.259984

243.1999922

GAS OIL FUT (ICE) Jan14

943.5

0.132661183

4.833333333

968

838.75

NATURAL GAS FUTR Jan14

4.176

1.507049101

3.111111111

4.825000286

3.464999914

305.67

0.006543432

2.535976653

320.0099945

278.0799866

Gold Spot $/Oz

1230.76

0.1351

-26.0565

1723.45

1180.57

Silver Spot $/Oz

WTI CRUDE FUTURE Jan14

NY Harb ULSD Fut Jan14 METALS

(H) 52W

(L) 52W

19.5653

0.2845

-35.0206

33.765

18.2208

Platinum Spot $/Oz

1360.5

0.0736

-10.3607

1742.8

1294.18

Palladium Spot $/Oz

733.42

-0.1266

4.8252

786.5

629.75

LME ALUMINUM 3MO ($)

1779

1.194539249

-14.18234443

2184

1736.25

LME COPPER 3MO ($)

7122

0.74975244

-10.20047913

8346

6602

LME ZINC

1905

0.421718503

-8.413461538

2230

1811.75

3MO ($)

LME NICKEL 3MO ($) AGRICULTURE ROUGH RICE (CBOT) Jan14

13760

0.072727273

-19.34349355

18770

13205

15.535

-0.064329366

0.778462536

16.80999947

14.91500092

435.75

0.345423143

-28.50697293

647.75

418.5

WHEAT FUTURE(CBT) Mar14

656.25

0.806451613

-21.10009017

894.5

647.75

SOYBEAN FUTURE Jan14

1333.5

0.603545832

1.871657754

1406

1169

COFFEE 'C' FUTURE Mar14

106.4

0.377358491

-33.64515123

172.25

104.1499939

SUGAR #11 (WORLD) Mar14

16.56

-0.180831826

-19.5335277

20.71999931

16.52000046

CORN FUTURE

Mar14

COTTON NO.2 FUTR Mar14

80.21

-0.248725283

1.007429795

90.61000061

76.65000153

World Stock Markets - Indices NAME

Last 25.7

25.1

Max 33.7

average 33.368

Min 32.75

Last 33.3

32.7

Currency Exchange Rates

NAME ENERGY

Min 25.15

32.9

COUNTRY MAJOR

AUD GBP CHF EUR JPY MOP HKD CNY INR THB SGD TWD PHP IDR AUDJPY EURCHF EURGBP EURCNY EURMOP EURJPY HKDMOP

ASIA PACIFIC

CROSSES

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

0.908 1.6355 0.8926 1.3706 103.12 7.9865 7.7537 6.0717 61.1575 32.15 1.252 29.605 44.15 11976 93.636 1.22341 0.8381 8.3222 10.9472 141.35 1.03

-0.2417 0.0367 -0.0784 0 -0.2036 0.005 0.0103 0.1812 0.421 0.0156 -0.2077 0.0608 -0.4575 -0.1002 0.0288 -0.0736 0.0274 -0.1862 -0.3133 -0.2264 0

-12.5072 1.1066 2.5543 3.9121 -16.505 -0.0413 -0.04 2.6171 -10.0764 -4.8834 -2.4441 -1.9321 -7.1234 -18.2281 -4.6019 -1.3021 -2.7061 -1.2581 -3.8074 -19.6533 -0.0097

1.0599 1.6443 0.9839 1.3832 103.74 8.0111 7.7664 6.2566 68.845 32.48 1.2862 30.228 44.82 12075 105.433 1.265 0.88151 8.4957 11.0434 141.55 1.032

0.8848 1.4814 0.8891 1.2746 82.12 7.9818 7.7498 6.0717 52.89 28.56 1.2168 28.913 40.54 9603 86.05 1.20625 0.80331 7.8281 10.195 105.98 1.0289

Macau Related Stocks NAME ARISTOCRAT LEISU CROWN RESORTS LT

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

VOLUME CRNCY

4.36

-2.242152

38.41269

5.12

3.04

6829201

16.29

-1.092896

52.67104

17.38

10.08

1670690

AMAX INTERNATION

1.93

10.91954

37.85715

2.12

0.75

46463587

BOC HONG KONG HO

25.65

0.3913894

6.431534

22.85

4690090

CENTURY LEGEND

0.52

-3.703704

96.22643

0.68

0.255

3184000

CHEUK NANG HLDGS

7.09

-1.11576

18.36394

7.28

4.5

23890

CHINA OVERSEAS

22.95

-0.4338395

-0.6493523

25.6

17.7

17600348

CHINESE ESTATES

23.3

107.1931

23.8

9.853

65500

CHOW TAI FOOK JE

11.8

2.076125

-5.144691

13.4

7.44

12067350

EMPEROR ENTERTAI

4.28

-0.6960557

126.455

4.66

1.65

2005000

FUTURE BRIGHT

3.83

2.133333

215.9998

3.96

1.103

2706000

GALAXY ENTERTAIN

63.95

0.6294256

110.7084

64.1

8920029

5873.43

HANG SENG BK

126.6

0.3965107

6.655437

132.8

110.6

675901

9424.83

7418.36

HOPEWELL HLDGS

26.1

0.3846154

-21.50376

35.3

23.2

684906

50.55257

15942.6

9487.95

HSBC HLDGS PLC

84.2

3.567032

90.7

77.85

17303603

0.2866938

5.09447

24111.55078

19426.35938

HUTCHISON TELE H

2.66

-3.623188

-25.2809

4.66

2.65

13788000

2450.872

-0.05770124

-2.856964

2791.303

2023.171

LUK FOOK HLDGS I

28.8

0.6993007

18.03279

31.5

16.88

1559000

MELCO INTL DEVEL

27.7

0.7272727

207.4362

28.2

8.2

1828800

8444.62

0.9190078

9.677513

8477.87

7491.52

MGM CHINA HOLDIN

29.2

1.213172

119.908

13.013

3907250

2000.38

1.008377

0.1667438

2063.28

1770.53

MIDLAND HOLDINGS

3.28

-0.6060606

-11.35135

4.29

2.68

1956000

NEPTUNE GROUP

0.335

-1.470588

120.3947

0.4

0.131

98835000

NEW WORLD DEV

10.12

-0.589391

-15.80699

15.12

9.98

8192831

SANDS CHINA LTD

62.9

1.615509

85.27246

63.6

32.05

8313434

COUNTRY

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

16020.2

1.255822

22.25297

16174.51

12883.89

NASDAQ COMPOSITE INDEX

4062.521

0.7278651

34.54223

4069.864

2951.036

FTSE 100 INDEX

6558.42

0.09813812

11.20093

6875.62

DAX INDEX

9211.23

0.4232257

21.00313

NIKKEI 225

15650.21

2.28989

HANG SENG INDEX

23811.17

CSI 300 INDEX

TAIWAN TAIEX INDEX KOSPI INDEX S&P/ASX 200 INDEX

5144.423

-0.8020796

10.65773

5457.3

4515.6

JAKARTA COMPOSITE INDEX

4216.239

0.8479502

-2.326975

5251.296

3837.735

FTSE Bursa Malaysia KLCI

1842.27

0.8385561

9.077833

1842.49

1597

SHUN HO RESOURCE

1.57

0.6410256

12.14286

1.92

1.33

20000

NZX ALL INDEX

990.975

0.1726531

12.34869

1048.998

858.253

SHUN TAK HOLDING

4.54

-0.6564551

8.35322

4.8

3.27

1720500

PHILIPPINES ALL SHARE IX

3680.8

-0.2079453

-0.491485

4571.4

3440.12

SJM HOLDINGS LTD

25.7

2.390438

44.80784

16.781

9062480

SMARTONE TELECOM

8.12

-4.132231

-42.32955

14.52

8.1

7739052

WYNN MACAU LTD

33.3

3.255814

58.94987

33.9

9172800

ASIA ENTERTAINME

N/A

75.38

-0.1192527

68.59763

78.03

43.57

308879

Euromoney Dragon 300 Index Sin

605.91

-0.18

-2.44

STOCK EXCH OF THAI INDEX

1361.26

-0.02276783

-2.203418

1649.77

1260.08

HO CHI MINH STOCK INDEX

511.23

0.2175959

23.56609

533.15

383.53

BALLY TECHNOLOGI

Laos Composite Index

1247.33

-1.44592

2.680337

1455.82

1196.44

BOC HONG KONG HO

3.28

6.840393

3.6

2.99

2970

GALAXY ENTERTAIN

8.25

1.226994

107.8086

8.25

3.65

11134

INTL GAME TECH

17.87

0.9034444

26.1115

21.2

13.58

3125450

JONES LANG LASAL

99.35

1.418947

18.35835

101.46

80.86

202630

LAS VEGAS SANDS

75.77

0.4108137

64.14645

76.295

43.5

4397853

MELCO CROWN-ADR

36.77

-1.155914

118.3492

37.45

14.99

2644826

MGM CHINA HOLDIN

3.75

-2.34375

114.25

3.88

1.703

23439

MGM RESORTS INTE

20.17

2.437786

73.28178

20.98

10.81

11146316

SHFL ENTERTAINME

23.19

#N/A N/A

59.93103

23.25

12.98

344231

SJM HOLDINGS LTD

3.236

-2.53012

42.07838

3.6

2.1494

7100

WYNN RESORTS LTD

173.16

1.020944

56.76005

174

106.9562

1383832

Shanghai Shenzhen Composite index is listing the biggest companies by market capitalisation. All data supplied by Bloomberg unless otherwise indicated.

AUD HKD

USD

Hang Seng Index NAME

PRICE

DAY %

VOLUME

PRICE

DAY %

VOLUME

AIA GROUP LTD

30.2

1.003344

16574881

CHINA UNICOM HON

13.68

1.333333

22775492

ALUMINUM CORP-H

3.61

15433022

CITIC PACIFIC

10.12

0.1980198

6468988

BANK OF CHINA-H

3.15

1.286174

329406866

BANK OF COMMUN-H

5.87

0.8591065

37793438

0.1727116

14.5

BANK EAST ASIA BELLE INTERNATIO

NAME

CLP HLDGS LTD

NAME

PRICE

DAY %

64.4

0.625

2568679

SANDS CHINA LTD

28.75

-0.1736111

6213954

SINO LAND CO

14.28

0.990099

7686664

SUN HUNG KAI PRO

109.1

1.018519

8616634

-0.4815409

2456828

265.6

1.45149

2048509

23.9

2206357

0.8064516

5926157

52.75

1.05364

3208615

POWER ASSETS HOL

65.6

1561243

CNOOC LTD

16.32

0.4926108

46287676

1260442

COSCO PAC LTD

11.76

3138217

SWIRE PACIFIC-A

7192500

ESPRIT HLDGS

12.44

-0.48

4211743

TENCENT HOLDINGS

0.2087683

10140777

HANG LUNG PROPER

26.55

-0.1879699

7812341

TINGYI HLDG CO

CATHAY PAC AIR

13.78

0.2911208

3140232

HANG SENG BK

119.7

0.167364

1690249

WANT WANT CHINA

CHEUNG KONG

114.9

1.23348

3918568

HENDERSON LAND D

2.059087

5880582

WHARF HLDG

75.55

0.1325381

701703

1.112235

6329376

125.6

3.54493

9625332

76.5 -0.06531679

9291476

BOC HONG KONG HO

CHINA COAL ENE-H

7.7

-0.1297017

40174849

CHINA CONST BA-H

5.87

1.206897

202072100

CHINA LIFE INS-H

22.9

0.4385965

30126882

CHINA MERCHANT

25.6

0.3921569

4209584

CHINA MOBILE

HENGAN INTL HONG KG CHINA GS HONG KONG EXCHNG HSBC HLDGS PLC

85.45

1.064459

16569813

HUTCHISON WHAMPO

CHINA OVERSEAS

20.2

-0.2469136

19374736

IND & COMM BK-H

CHINA PETROLEU-H

8.36

0.9661836

101198904

CHINA RES ENTERP

25.2

0.8

77.35

1.243455

6697663

5.17

1.372549

317570965

LI & FUNG LTD

12.84

-0.9259259

17517410

4219717

MTR CORP

29.85

1.530612

4880670

MOVERS

23970

LOW

23576.29

CHINA RES LAND

17.16

1.179245

6849146

NEW WORLD DEV

12.98

1.564945

12528960

52W (H) 24111.55078

CHINA RES POWER

16.08

-0.618047

7490964

PETROCHINA CO-H

10.94

-1.263538

64234127

(L) 19426.35938

CHINA SHENHUA-H

33.35

-0.1497006

11160228

PING AN INSURA-H

63.35

1.198083

8338502

2 23980

INDEX 23811.17 HIGH

VOLUME

23570

5-December

9-December

15 15

December 10, 2013 April 19, 2013

Opinion Business

wires

Leading reports from Asia’s best business newspapers

Straits Times Police in Singapore have made 27 arrests after hundreds of people took part in a riot sparked by the death of an Indian national. Trouble started after the 33-year-old man was knocked down by a private bus in a district known as Little India. About 400 people took to the streets, hurling railings at police and torching police cars and an ambulance. At least 16 people were hurt, most of them police officers, before the violence was brought under control. Prime Minister Lee Hsien Loong said that “whatever events may have sparked the rioting, there is no excuse for such violent, destructive, and criminal behaviour”.

Wall Street Journal Australia should not be foolish in thinking it is going to continue having uninterrupted economic expansion, RBA governor Glenn Stevens said, warning that a downturn would happen eventually. Mr Stevens said the country was “building up this myth of 22 years of uninterrupted growth” and that sooner or later, there was a “probability of ... more or less 100 percent” that a downturn would happen. “We would be foolish to think that we have found the secret of completely eliminating the cycle, because we haven’t,” Mr Stevens said.

The Star Sona Petroleum Bhd, Malaysia’s oil and gas cash shell, has identified a new oil field asset in Indonesia to buy after failing to clinch a deal in September. Sources claim that Sona Petroleum is looking to buy a 100 percent stake in a Sumatra oilfield which is producing 1,500 barrels of oil per day. The oilfield is also said to have the capability of ramping up production to 4,000 barrels a day. Sona Petroleum is currently conducting a due diligence on the assets and it expects to conclude the deal, valued at US$135 million, by early next year.

Jakarta Globe Indonesia’s small- and mediumsized domestic mineral miners voiced concerns that they lacked the funds to comply with a long-anticipated ban on unprocessed mineral exports, due to begin next year. The current regulation indirectly favours large international firms, they said. “The national mining industry will die before it develops,” the Indonesian Mineral Entrepreneurs Association said in a statement. The association argued that local miners, most with operations less than 10 years old, did not have enough capital to build their own smelters.

An agenda to save the euro Joseph E. Stiglitz

Nobel laureate in economics, is University Professor at Columbia University

t has been three years since the outbreak of the euro crisis, and only an inveterate optimist would say that the worst is definitely over. Some, noting that the eurozone’s double-dip recession has ended, conclude that the austerity medicine has worked. But try telling that to those in countries that are still in depression, with per capita GDP still below pre-2008 levels, unemployment rates above 20 percent, and youth unemployment at more than 50 percent. At the current pace of “recovery,” no return to normality can be expected until well into the next decade. A recent study by Federal Reserve economists concluded that America’s protracted high unemployment will have serious adverse effects on GDP growth for years to come. If that is true in the United States, where unemployment is 40 percent lower than in Europe, the prospects for European growth appear bleak indeed. What is needed, above all, is fundamental reform in the structure of the eurozone. By now, there is a fairly clear understanding of what is required: 1. A real banking union, with common supervision, common deposit insurance, and common resolution; without this, money will continue to flow from the weakest countries to the strongest; 2. Some form of debt mutualisation, such as Eurobonds: with Europe’s debt/GDP ratio lower than that of the U.S., the eurozone could borrow at negative real interest rates, as the U.S. does. The lower interest rates would free money to stimulate the economy, breaking the crisis-hit countries’ vicious circle whereby austerity increases the debt burden, making debt less sustainable, by shrinking GDP; 3. Industrial policies to enable the laggard countries to

catch up; this implies revising current strictures, which bar such policies as unacceptable interventions in free markets; 4. A central bank that focuses not only on inflation, but also on growth, employment, and financial stability; 5. Replacing anti-growth austerity policies with progrowth policies focusing on investments in people, technology, and infrastructure.

But migration from crisishit countries, partly to avoid repaying legacy debts (some of which were forced on these countries by the European Central Bank, which insisted that private losses be socialised), has been hollowing out the weaker economies. It can also result in a misallocation of labour.

Wrong policies Much of the euro’s design reflects the neoliberal economic doctrines that prevailed when the single currency was conceived. It was thought that keeping inflation low was necessary and almost sufficient for growth and stability; that making central banks independent was the only way to ensure confidence in the monetary system; that low debt and deficits would ensure economic convergence among member countries; and that a single market, with money and people flowing freely, would ensure efficiency and stability. Each of these doctrines has proved to be wrong. The independent U.S. and European central banks performed much more poorly in the run-up to the crisis than less independent banks in some leading emerging markets, because their focus on inflation distracted attention from the far more important problem of financial fragility. Likewise, Spain and Ireland had fiscal surpluses and low debt/ GDP ratios before the crisis. The crisis caused the deficits and high debt, not the other way around, and the fiscal constraints that Europe has agreed will neither facilitate rapid recovery from this crisis nor prevent the next one. Finally, the free flow of people, like the free flow of money, seemed to make sense; factors of production would go to where their returns were highest.

At the current pace of ‘recovery,’ no return to normality can be expected until well into the next decade

Internal devaluation – lowering domestic wages and prices – is no substitute for exchangerate flexibility. Indeed, there is increasing worry about deflation, which increases leverage and the burden of debt levels that are already too high. If internal devaluation were a good substitute, the gold standard would not have been a problem in the Great Depression, and Argentina could have managed to keep the peso’s peg to the dollar when its debt crisis erupted a decade ago.

High price No country has ever restored prosperity through austerity. Historically, a few small countries were lucky to have exports fill the gap in aggregate demand as public expenditure contracted, enabling them to avoid austerity’s depressing effects. But European exports have

barely increased since 2008 (despite the decline in wages in some countries, most notably Greece and Italy). With global growth so tepid, exports will not restore Europe and America to prosperity any time soon. Germany and some of the other northern European countries, demonstrating an unseemly lack of European solidarity, have declared that they should not be asked to pick up the bill for their profligate southern neighbours. This is wrong on several counts. For starters, lower interest rates that follow from Eurobonds or some similar mechanism would make the debt burden manageable. The U.S., it should be recalled, emerged from World War II with a very high debt burden, but the ensuing years marked the country’s most rapid growth ever. If the eurozone adopts the programme outlined above, there should be no need for Germany to pick up any tab. But under the perverse policies that Europe has adopted, one debt restructuring has been followed by another. If Germany and the other northern European countries continue to insist on pursuing current policies, they, together with their southern neighbours, will wind up paying a high price. The euro was supposed to bring growth, prosperity, and a sense of unity to Europe. Instead, it has brought stagnation, instability, and divisiveness. It does not have to be this way. The euro can be saved, but it will take more than fine speeches asserting a commitment to Europe. If Germany and others are not willing to do what it takes – if there is not enough solidarity to make the politics work – then the euro may have to be abandoned for the sake of salvaging the European project. © Project Syndicate

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December 10, 2013 April 19, 2013

Closing RWS exec fined for casino levy refunds

HSBC eyes listing of U.K. bank

A Singapore court fined a second Resorts World Sentosa executive for misleading the Casino Regulatory Authority about illegal reimbursement of casino entry levies. Sim Bee Ling, 31, a former director of VIP services, was fined S$20,000 (127,700 patacas). She admitted trying to conceal issuance in 2011 of Universal Studios Singapore tickets for customers renewing annual levies. A one-day adult pass for the attraction currently starts at S$74. Albert Lim Tze Chean, former RWS vice-president of VIP services, was last month fined S$100,000 for giving misleading information to CRA and on eight charges of deleting computer evidence.

HSBC Holdings Plc is considering the flotation of up to 30 percent of its British retail and commercial banking arm, the Financial Times reported, a move that would help it cope with planned new rules that demand that British banks ringfence their retail arms. Citing three people familiar with the project, the FT said the plan was at an early stage but the matter had been discussed with investors and informally at board level. The paper added that investors estimate such a business could float with a market capitalisation of about 20 billion pounds (US$32.7 billion). Such a move would coincide with a slew of other bank listings in the U.K.

European banks trim risk but fail to raise provisions Regulators to review banks’ asset quality as of December 3l Laura Noonan

ost of Europe’s big banks shed risky assets in the quarter to September, but they have yet to take extra provisions against doubtful loans to show they have put the financial crisis behind them in time for a critical review by regulators. After reckless lending brought several banks and some governments

to their knees during the global crisis, which is still playing itself out in a number of eurozone countries, next year’s Asset Quality Review (AQR) by the European Central Bank will judge whether the banks have done enough to recognise and provide for losses on their loan books as of December 31. The results feed into EU-wide

stress tests that assess whether banks need to raise more capital to insulate themselves against future economic and financial shocks. A Reuters analysis of the thirdquarter results of Europe’s 30 largest banks found that almost two thirds of the 27 that report detailed quarterly figures said their balance sheets were

less risky at the end of September than at the end of June. Cutting risk means they need less capital. Assets such as unsecured personal loans, distressed commercial loans and certain derivatives carry a higher risk weighting, while government bonds are unweighted. Swiss bank UBS AG cut 9 billion Swiss francs (US$10 billion) of risk-weighted assets (RWA) in the quarter by exiting derivatives positions, while Spain’s Bankia SA traded risky real estate assets with national “bad bank” Sareb for 19.5 billion euros (US$26.6 billion) of government‑guaranteed bonds. But almost two thirds of the banks took lower charges for loan losses in the third quarter than a year earlier, and the ‘coverage ratio’ – what they set aside for losses relative to their stock of impaired loans – rose only marginally. At a recent industry event in Brussels, the head of the ECB’s AQR working group, Dutch regulator Anthony Kruizinga, was asked how banks should prepare their yearend statements if details of the AQR remain unclear. Banks should be more prudent, he replied. The DNB and ECB both declined to elaborate. As things stand, coverage ratios vary widely across the EU, ranging from 94 percent at Commerzbank AG to below 50 percent at others. The ratios are difficult to compare across banks since they all use slightly different metrics, but are expected to be closely examined in the ECB’s tests. Banks were expected to improve the ratios in the run-up to the tests by taking more provisions, but coverage ratios rose on average just 3 percent in the year to September 30 among the 22 that report the data. Nine had lower ratios. Reuters

Greenland gets US$250 mln for Sydney apartments Chinese developer investing in Australia’s two most-populous cities

reenland Holding Group Co Ltd, one of the largest Chinese investors in the U.S., sold about A$275 million (US$250 million) of apartments at its first Australian project as buyers snapped up almost all of the units offered. The state-owned developer sold 241 of 250 apartments released in the first stage of Greenland Centre, the 66-floor central Sydney tower expected to be the tallest in the city, said David Milton, managing director for residential projects at selling agent CBRE Group Inc. The most expensive was a three-bedroom unit on the 55th floor, which went for A$3.7 million to a Chinese buyer living in

Australia, he said. “We had enormous interest, about 4,000 in the four to five weeks leading up to it,” Sydney-based Mr Milton said in a telephone interview yesterday. “This has been one of the most highly anticipated projects, with one of the highest level of inquiries that we’ve had.” Greenland has invested more than A$1 billion on sites in Sydney and Melbourne, Australia’s two mostpopulous cities and the areas that are seeing the highest level of demand from mainland Chinese buyers. The company joins Chinese developers, including Dalian Wanda Group and ABP (China) Holdings

Group Ltd, which are moving overseas as the government maintains curbs to cool the housing market at home. The expansion of Chinese companies abroad follows an “explosion” in Chinese individual purchases of luxury western products, overseas holidays and homes, according to an August report by broker Savills Plc. “This combined with increasing competition in the domestic property market and the weakness of overseas markets, has presented good opportunities for China to acquire land, resources, companies, brands and real estate,” James MacDonald, associate director for China research,

wrote in the report. Mainland China and Hong Kong together were the second-largest source of investment in overseas markets between 2008 and 2011, accounting for US$146 billion, second only to the U.S., he said. Greenland began sales simultaneously in Sydney, Shanghai, Hong Kong and Singapore over the weekend for the apartments, whose prices start at A$528,000 for a studio, Mr Milton said. About a quarter were sold to overseas buyers, he said. A date hasn’t been announced for the release of the second stage with 220 apartments, he said. Bloomberg News